9 August 2024 | 8:07PM HKT China: Q2 2024 BOP data suggest faster capital outflows Bottom line: China's preliminary Balance of Payments (BOP) data showed faster capital outflows in Q2 2024 on the back of more outflows through the direct investment channel and foreigners' selling of RMB assets as well. Current account surplus widened in Q2 from Q1 due entirely to a higher goods trade surplus, and FX reserves decreased in Q2. Main points: 1.The preliminary BOP data show three main categories of China's intern ...

Rating Change 12 August 2024 BUY Prior rating: HOLD 41% side Target price: HK$5.70 Prior TP: HK$3.60 1478 HK Price: HK$4.05 TP basis: PE Sector rating: NEUTRAL Forecast Revisions (%) Year ended 31 Dec 24E 25E 26E Revenue 8.5 4.7 5.6 Core EPS 17.0 5.6 3.4 Source: BOCI Research estimates Trading Summary HK$ Turnover (HK$ m) 14/08/23 14/09/23 14/10/23 14/11/23 14/12/23 14/01/2414/02/2414/03/2414/04/2414/05/2414/06/2414/07/24 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 0 40 80 120 160 200 240 280 Turnover Q Technology HSI ...

Target Price Change 13 August 2024 BUY 75% side Target price: US$24.62 Prior TP: US$22.03 BEKE US Price: US$14.03 TP basis: EV/EBITDA Sector rating: - Forecast Revisions (%) Year ended 31 Dec 24E 25E 26E Revenue 6.8 8.5 9.4 Adjusted EPS 10.7 11.5 12.1 Source: BOCI Research estimates Trading Summary US$ Turnover (US$ m) 14/08/23 14/09/23 14/10/23 14/11/23 14/12/2314/01/2414/02/2414/03/2414/04/2414/05/2414/06/2414/07/24 12.0 13.0 14.0 15.0 16.0 17.0 18.0 19.0 20.0 21.0 0 100 200 300 400 500 600 700 800 900 Tu ...

Target Price Change 12 August 2024 BUY 125% side Target price: HK$29.00 Prior TP: HK$33.00 1548 HK Price: HK$12.90 TP basis: SOTP Sector rating: OVERWEIGHT Forecast Revisions (%) Year ended 31 Dec 24E 25E 26E Revenue (8.1) (19.5) 0 Core EPS NM NM 0 Source: BOCI Research estimates Trading Summary HK$ Turnover (HK$ m) 14/08/23 14/09/23 14/10/23 14/11/23 14/12/23 14/01/2414/02/2414/03/2414/04/2414/05/2414/06/2414/07/24 8.0 10.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0 Turnover Genscript Biotech HSI | --- | --- ...

s August 13, 2024 Online Media: Neutral Earnings Review China Literature (772 HK, BUY, TP: HK$32.00) | --- | --- | --- | --- | |-------------------------------------------------------|-------|-----------------|-------------| | Target Price: HK$32.00 | | Price: HK$25.35 | | | Potential up/downside to TP +/-% | | | +26% | | 52-Week High/Low (HK$) | | | 33.50/20.40 | | Market Cap (US$mn) | | | 3,337 | | Shares Outstanding (mn) | | | 1,026 | | 3-mth ADTV (US$mn) | | | 10 | | Free Float (%) | | | 40 | | Major Sh ...

Investment Rating - The report maintains a positive outlook for certain Quantitative Investment Strategies (QIS) while being less constructive on FX DM Carry and Equity Momentum [1][9]. Core Insights - The report highlights a shift in the investment hypothesis characterized by lower monetary policy rates in many countries and a soft landing for the global economy, albeit with increased uncertainty [1][2][7]. - QIS strategies are expected to perform well in the current environment, particularly in Rates Trend, Rates Long Straddle Replication, Equity Value, Equity Quality, and Equity Relative Value and VIX Volatility Carry [1][13]. - Conversely, FX DM Carry and Equity Momentum are anticipated to face challenges due to recent market volatility and changing economic conditions [1][35][36]. Summary by Sections Backdrop - Recent market volatility was influenced by soft US employment data and disappointing ISM Manufacturing PMI, leading to increased uncertainty about economic growth and a higher probability of Fed rate cuts [2][5]. Fundamental Outlook - The Chief Global Economist at Morgan Stanley expects a soft landing for the US economy, with policy rates projected to end 2024 at 4.625% in the US, 3.25% in Europe, and 0.25% in Japan [7][8]. QIS Performance - Year-to-date, QIS strategies have delivered an average performance of +2.2% annualized, outperforming the long-term average of +1.8% [9][10]. - Specific strategies like VIX-based convex strategies and Low Risk in equities have performed well during recent volatility [10][24]. Strategies Expected to Perform Well - Strategies expected to excel include Rates Trend, Rates Long Straddle Replication, Equity Value, and Equity Quality, driven by favorable market conditions and a robust quantitative approach [1][13][18]. Strategies Expected to Face Challenges - FX DM Carry has underperformed, primarily due to a short position in JPY against USD, while Equity Momentum is expected to deliver below-average performance amid heightened market volatility [35][36].

Investment Rating - The report has moved from Underweight (UW) to Marketweight (MW) for Asia FX in GBI-EM [3] Core Views - Rate differentials have been a significant factor in low-yielding Asia FX, with short-term valuations correcting in funders like JPY, CNH, and THB, while MYR appears tactically rich [3] - The recent decline in USD/CNH is attributed to relative rate momentum, with Chinese corporates holding up to $300-600 billion in unsold dollars, posing a risk for further CNY strength [3][10] - The Federal Reserve is expected to cut rates more aggressively, leading to a lower year-end USD/CNY target of 7.15, down from 7.30 previously [3][17] - Geopolitical risks are highlighted as a significant factor affecting CNY FX, leading to a cautious outlook on the long-term forecast for USD/CNH [3][17] Summary by Sections Asia FX Dynamics - Asian currencies perform best in the early stages of the business cycle, requiring firmer current accounts and easier financial conditions for a sustained rally [3] - The report remains constructive on domestically oriented high yielders like INR and PHP, awaiting fairer valuations before re-engaging [3] Malaysia's Economic Outlook - Malaysia is experiencing a resurgence, driven by prudent fiscal reforms and stable politics, although significant FX hoarding remains a concern [3][40] - The MYR has rallied 6% against the USD recently, but longer-term valuations are misaligned with fundamentals due to shifts in market psychology [3][41] USD/CNH Projections - The fair value range for USD/CNH has been lowered to 6.95-7.15 from 7.18-7.25, preserving room for further downside [3][17] - The report emphasizes that the path for USD/CNY may not be linear due to geopolitical headwinds, suggesting a more cautious approach to positioning [3][17] Tactical Considerations - The report suggests that paying CNH points may be a better strategy for narrowing the US-CN yield gap in the medium term [3][17] - The report notes that increased hedging demand from corporates could pressure CNH points on the lower side, indicating a need for caution [3][17]

Investment Rating - The report indicates a positive outlook for MXCN with a target price of 67, suggesting a potential upside of 19% [30] - The CSI300 has a target price of 4000, indicating a potential upside of 20% [30] Core Insights - MXCN gained 2% while A-shares experienced volatility, with export growth missing expectations at 7.0% year-on-year, while import growth was at 7.2% year-on-year [2] - The report highlights that the State Council has released policies to boost services consumption and that Shenzhen has initiated a program to acquire unsold houses for affordable housing [2][20] - The report notes that the earnings growth forecast for 2024 is 12% for MXCN and 14% for CSI300, with respective P/E ratios of 8.8x and 10.9x [2][30] Performance Summary - MXCN and CSI300 forward P/E ratios are 8.8x and 10.9x, respectively, with expected EPS growth of 12% and 15% for 2024 and 2025 [2] - The report indicates that sectors such as Industrials and Energy have been revised up the most, while Materials and Momentum lagged behind [2] Earnings and Valuations - The report shows that 13% of all China-listed companies have reported earnings for 1H24, with a year-on-year growth of 10% [11] - The earnings growth for various sectors varies, with Consumer Discretionary at 19% and Energy at -11% [11] Policy Summary - The report outlines recent monetary and fiscal policies aimed at stabilizing the market, including the PBOC's supportive monetary policy stance and the allocation of RMB 300 billion (approximately USD 41 billion) in special treasury bonds [20] - It also mentions the relaxation of home-buying requirements in major cities to stimulate the housing market [20] Market Outlook - The report predicts that small caps are likely to underperform large caps modestly, while H shares are expected to outperform A shares over the next three months [24] - The overall economic forecast for China indicates a real GDP growth of 4.9% for 2024, down from 5.2% in 2023 [32]

Investment Rating - The report suggests a cautious approach to Japanese equities, emphasizing the need to manage risk due to ongoing downward pressure on Japanese shares [4][10]. Core Insights - The TOPIX P/E ratio has fallen to recession-era levels at 11.5x as of August 5, 2024, which is below the past 10-year average of 14x and the bear case scenario of 13x [6][10]. - The report indicates that the downturn in share prices is expected to reverse once pessimism regarding the US economic outlook diminishes [2][10]. - The contrasting monetary policies of the US and Japan, along with weak US job figures, have led to a significant shift in market strategies, particularly affecting yen carry trades and positions in high-tech stocks [3][8]. Summary by Sections Market Conditions - The Japanese stock market experienced a sharp decline following the Bank of Japan's (BoJ) July monetary policy meeting, with the Nikkei average dropping ¥4,451 to ¥31,458, marking the largest single-day drop in the index's history [8]. - Concerns about a potential US recession have heightened, although some economists believe a soft landing is still achievable [9]. Monetary Policy Implications - The BoJ's recent pivot from an accommodative stance, including unexpected rate hikes, has contributed to market volatility and a stronger yen, which in turn has negatively impacted Japanese equities [8][13]. - The upcoming speech by BoJ Deputy Governor Shinichi Uchida is anticipated to provide insights into the implications of the yen's appreciation and the stock market's decline [13]. Stock Selection Strategy - The report emphasizes the importance of selecting stocks based on volatility factors, as the current market environment is characterized by heightened volatility and uncertainty [7][16]. - A list of low-volatility and high-volatility stocks is provided to assist investors in navigating the current market conditions [16][21].

Investment Rating - The report retains a base case of the Bank of Japan (BoJ) raising rates at a measured pace, with an expected rate hike of 0.5% in January 2025 [2]. Core Insights - Deputy Governor Uchida stated that the BoJ would not raise its policy rates while financial and capital markets remained unstable, indicating a dovish stance [1][2]. - The condition for policy revision could be satisfied if financial market instability calms down, with sustained wage growth improving due to structural labor shortages [2]. - The BoJ is increasingly interested in the US economic outlook for its policy discussions, with Uchida expressing a belief in a soft landing for the US economy [2]. Summary by Sections Monetary Policy Stance - Uchida emphasized that the BoJ will not raise interest rates when financial and capital markets are unstable, which was interpreted as a dovish position [1]. - The bank's existing policy decision process remains consistent with Uchida's statements, focusing on economic activity and price projections [1][2]. Economic Outlook - Sustained wage growth is expected to improve, with strong wage hikes being reflected in actual wages [1]. - The report suggests that the US economic outlook is becoming more significant in the BoJ's policy discussions, with Uchida noting the potential for a soft landing in the US economy [2].